One of the most important assets a small business possesses is the ability to quickly change direction when its market changes. Usually, there are not a lot of chefs in the kitchen deciding how to best proceed, nor are there many departments fighting to keep their budget dollars.
Instead, an owner can make a decisive move that changes the company’s focus quickly. Sadly, many small businesses that have success cling to a model of, “If it ain’t broke, don’t’ fix it!” even as they watch their industry move through change, driven by a maturation cycle.
I recently spoke with a small manufacturer that was selling direct to large national retailers in an industry that had been going through consolidation for the past 10-15 years. Last year, they lost their large retail customers who were going through the process of vendor consolidation in order to reduce what is called “soft costs” in the inventory cycle. Soft costs savings are real and significant, especially for large companies selling a significant number of SKUs. These savings drive industries working with commodities to go through consolidation, and it is a typical part of an industry’s maturation cycles.
Understanding this maturation cycle and where the industry is at when you enter can help you anticipate the future, and determine the best way to steer your business as you see signs of change within your industry. Planning for what is extremely likely to come positions you to treat these changes as an opportunity, instead finding yourself in the reactive position of trying to find new sources of distribution when all the eggs in your basket have matured, and flown from the nest.